UPSTREAM SUPPLY CHAIN MANAGEMENT AND COMPETITIVE PERFORMANCE IN THE AUTOMOTIVE SUPPLY INDUSTRY

Abstract

Externally purchased materials account for 60-70% of the manufacturing costs of a new car made by the Big 3 U.S. automakers. They are increasingly outsourcing noncore activities and relying on upstream first-tier suppliers to deliver competitive advantages. Outsourcing may allow a buying firm to leverage internal and external capabilities; improve product quality, technology, cost, and delivery; and maximize flexibility in responding to changing market conditions. In order to realize these potential advantages, a variety of supply chain management (SCM) practices have been implemented, such as developing suppliers, building closer buyer-supplier relationships, and just-in-time (JIT) purchasing processes. These key practices are at least complementary and perhaps interdependent. Although U.S. automakers have concentrated SCM efforts on first-tier suppliers, it is expected that these suppliers will in turn proactively manage other tiers in the supply chain. In this paper, the authors focus on the first-tier suppliers and explore 2 primary research questions: 1) to what extent are these suppliers practicing supplier development, supplier partnering, and JIT purchasing with their upstream source; and 2) how do these key SCM practices, both individually and collectively, relate to improved competitive performance? The authors examine performance in terms of flexibility, innovation, quality, and cost; focus on several specific items within each of these categories; and analyze each category as a whole. SCM strategies and practices used by the Big 3 are studied, and supplier development and partnering and JIT purchasing are identified by the literature as key, interrelated SCM practices. A conceptual model and related hypotheses are developed. The hypotheses examine both individual and aggregate effects of SCM practices on competitive performance. The research methods and data analyses are then presented. Lastly, the results are interpreted and discussed, and directions for future research are explored.